KUALA LUMPUR: Bank Negara Malaysia is expected to lower the Overnight Policy Rate (OPR) in the second quarter of 2026 (Q2 2026) to cushion the economy against an anticipated slowdown in external demand.
CIMB Securities noted that Malaysia’s economic outlook for 2026 remains positive, supported by resilient domestic demand and a firm labour market. This outlook is further supported by a stable unemployment rate of 3.0 per cent and sustained momentum in employment growth.
“We expect the OPR to remain at 2.75 per cent in Q1 2026, as growth should stay supported by firm domestic demand —underpinned by festive-related spending alongside another RM100 cash disbursement for Malaysians in mid-February 2026.
“However, a slowdown on the external front is likely to emerge, amid softer demand from major trading partners, which will weigh on Malaysia’s overall export outlook. Consequently, we now expect a 25 bps rate cut in Q2 2026 during the Monetary Policy Committee (MPC) meeting in May,” it added.
It added that overall price pressures remain contained despite the mild labour market tightness, which contributed to a slight uptick in core inflation.
“This provides Bank Negara with sufficient policy flexibility should growth conditions warrant further easing,” it said.
The firm forecast the economy to expand 4.3 per cent this year and 4.1 per cent in 2026, underpinned by resilient domestic demand.
Meanwhile, Hong Leong Investment Bank Bhd (HLIB Research) expects the central bank to keep the OPR unchanged at 2.75 per cent next year.
Following the conclusion of US trade negotiations with Malaysia, which resulted in further tariff exemptions, the firm estimated that around 57 per cent of Malaysia’s exports to the US are now exempt from reciprocal tariffs.
“These developments, alongside a truce between the US and China as well as a steady growth outlook, have led Bank Negara to adopt a neutral monetary policy stance.
“Given this backdrop, we expect the MPC to keep OPR unchanged at 2.75 per cent in 2026. In the near term, markets focus will remain on developments in the ongoing Trump tariff lawsuit and potential announcements regarding semiconductor tariffs,” it added.
Additionally, Maybank Investment Bank Bhd (Maybank IB) said the MPC’s statement signalled a stable OPR outlook for next year.
“The MPC maintains a balanced assessment by Bank Negara on global economic outlook. While acknowledging downside risk, especially from the overhang in product-specific US tariffs with the addition of financial markets’ elevated valuation, finalised US reciprocal tariff rates and trade negotiations with trading partners have eased uncertainties while the global economy is still growing amid macro policy support, the less restrictive monetary policy and fiscal stimulus with the potential bonus of a milder tariffs impact.
“The statement’s lingo is consistent with our forecast of OPR staying at 2.75 per cent next year given upside to economic growth outlook versus our current forecasts of 4.2 per cent in 2025 and 4.1 per cent in 2026,” it said in a note.
Maybank IB also sees moderate upside to inflation reflecting manageable cost-push factors following targeted fiscal and structural reforms as well as long overdue adjustments such as Sales and Services Taxes and Tenaga Nasional Bhd electricity tariffs reviews, higher labour costs from minimum wage hike, foreign workers’ EPF contribution and multi-tier foreign worker levies.
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